I've been working with entrepreneurs for more than 10 years, and by far the biggest question I get asked is...
"How can I raise venture capital?"
Like it or not, much of our success as entrepreneurs depends on our ability to secure enough funding.
And when it comes to venture capital in particular, the vast, VAST majority of entrepreneurs go about it the wrong way...
For every 10,000 entrepreneurs who try, only a handful succeed. The harsh reality is that the other 99.9% fail.
And if you go about raising venture capital like MOST entrepreneurs do, then you'll probably get the same results that most entrepreneurs do.
Most entrepreneurs "blast" their business plans to hundreds or thousands of VC firms... but they get no meetings, no term sheets... and no funding.
Yet, every week - if not every day - you see news reports of companies who've raised millions of dollars in venture capital (even during this "slow down" in the economy).
In fact, just a few weeks ago, on April 22, 2010, one of our clients, Click Forensics, Inc. raised another $6 million in venture financing, for a total funding of $15 million.
So why am I telling you this?
You can greatly increase your chances of raising venture capital if you take the RIGHT approach. And I want to give you access to my proven methodology.
For the past 10 years, I've been developing my system for raising venture capital. It's the same system we use for Growthink clients (who have raised $1 billion since 1999).
About a year ago, I revealed my entire venture capital system to a small group of entrepreneurs, and since then many more have been on the waiting list.
Well, the wait is almost over... I'm planning to share all of my venture capital strategies and tactics again next month, so YOU can dramatically increase your chances of getting funded.
But before I unleash this thing, I want to do one final check to make sure that my system really has everything you need.
So I have this one question for you...
"If you could have a private conversation with me, what 2 questions would you like to ask me about venture capital?"
Click here to tell me your questions
When you click that link, you'll be taken to an online survey form, where you can type your response.
I really want to make sure that I answer ALL of your questions about raising venture capital.
What are your 2 biggest questions about raising venture capital?
Tell me here:
My wife and I recently watched an episode of CBS Sunday morning with Charles Osgood.
The show always has interesting news segments, and in this episode, there was a segment about Google Doodles.
Google Doodles are the new versions of the Google logo that you see on Google's homepage every so often. You can see a history of these images here: http://www.google.com/logos/
Google has a team of 4 or so "doodlers" who spend their days creating new doodles. They also run contests whereby others create and submit doodles and can win cash prizes and get their designs seen by millions if they win.
The new doodles make it more interesting and exciting for people to visit Google's homepage. This in turn drives more people to Google every day.
Which leads to a great question -- what are you doing in your business that promotes positive curiosity in your customers? Can they expect something new from you when they visit your store or website, or will they get the same experience month after month, year after year.
Clearly you need to be innovating in order to not only keep up with changing customer demands, but to keep customers interested in what you're doing and to distinguish yourself from competitors.
The Hawthorne Effect also comes into play here. The Hawthorne Effect basically states that any change will result in increased results. For example, a store that changes the color of its walls will generally see a short-term boost in sales from its regular customers. Likewise, a slight change in work conditions will boost employee productivity.
Yes, change for the sake of change alone often produces results.
Today's Question: The Ford Motor Company manufactured 1 million cars for the first time in 1922. In what year did it hit the 2 million mark?
Question on 5/5/10: What were Kleenex tissues marketed as when they were first introduced in 1924?
Answer: Kleenex tissues were originally marketed as a cold cream remover. By promoting it as a cleaner, healthier alternative to towels and handkerchiefs forremoving cosmetics, it quickly became a mainstay in households across the nation.
In 1927, the company's head researcher started using the tissues in place of a handkerchief for his hay fever. It took him 3 years to convince the head of advertising to try to market the tissues for this use. And by late 1930, the use of Kleenex tissues as a handkerchief substitute really took off.
The lesson here is that your products and services may satisfy customers in ways you might not know and never intended. It's interesting that it took Kleenex 3 years before it tried advertising the product for the new use. Don't be afraid to experiment in order to find breakthrough products and services.
Last week, a NY company, ATK GASL, received a $1 million grant from ARPA-E, the Advanced Research Projects Agency Energy.
The grant was given to help the company figure out ways to minimize the amount of greenhouse gases emitted from burning coal.
If successful, the company will supply their findings to the government, and commercialize it to generate significant profits.
ARPA-E is a U.S. Energy Department spinoff of the Department of Defense's Advanced Research Projects Agency, which studies new military technology.
The Department of Defense is one of 25 federal grant-making agencies that fund new and existing businesses via grants. Other agencies include the Department of Agriculture, Department of Commerce, and the Department of Education among others.
To learn more about grant funding and how to get it for your business, download Growthink's Step-by-Step Guide to Raising Capital for Your Business from Grants here.
What were Kleenex tissues marketed as when they were first introduced in 1924?
Series B funding, as you may recall, is the 2nd institutional round of equity funding that a company receives.
Typically a Series B financing event will raise $5 to $10 million for the company. But this is just a guide, and many companies raise less or more than this amount.
Like Amonix who designs and manufacturers concentrated photovoltaic solar power systems.
Last week Amonix raised a $129.4 million Series B financing round - this is the biggest Series B round I've seen in a long time. The round was led by the VC firm Kleiner, Perkins, Caufield & Byers. Other participants in the round included Adams Street Partners, Angeleno Group, PCG Clean Energy & Technology Fund, Vedanta Capital LP, New Silk Route, The Westly Group, and current investor MissionPoint Capital Partners.
A few notes to point out:
1. $129.4 million - yes, that's a LOT of money. There is a ton of financing waiting for the right companies. So yes, even in this economy, venture capital financing IS readily available.
2. The round was "led" by one VC firm. The "lead" VC firm creates the terms of the deal. They also invest the most money. The other investors are called "syndicate investors" or "co-investors" and invest at the same terms as the lead investor, so you only need to negotiate once. Having multiple VC firms participating in a venture capital financing event is common.
3. The "current investor" means the investor who provided the previous round of funding (Series A). Oftentimes, as happened in this case, that investor will put in more money to retain their share of the company's equity.
If you are seeking venture capital financing, I not only lay out the exact proven path you should take, but educate you on every detail you need to know in my Step-By-Step Guide to Raising Venture Capital.
Click here to learn more.
After my column a few months ago regarding Jeff Bezos' now famous (and incredibly profitable) investment into Google in 1998, I was deluged with comments and opinions on this question - was his investment luck or was it foresight?
The backdrop again: In 1998 when Larry Page's and Sergey Brin's Google offices were a Menlo Park, California garage - Bezos invested $250,000 of personal funds into the fledgling search engine.
When Google went public in 2004, that $250,000 investment translated into 3.3 million shares of Google stock. At Google's IPO that represented a stock share position worth over $280 million!
While Bezos does not disclose how many of those shares he still holds, at the current price of Google stock they would represent an investment position of over $1.5 billion.
So was it luck? Or foresight?
In Bezos' words, "There was no business plan. They had a vision. It was a customer-focused point of view." And more tellingly he adds, "I just fell in love with Larry and Sergey."
So whether luck or foresight, this is a wow story of the first order. Lessons learned:
1. Think Long Term. Even though Google has been the fastest rocket ship growth company in the history of capitalism, it was still SIX YEARS from Bezos' investment in the company to liquidity.
2. Get In Early. Sure, it would have been great to get into Google at its IPO price of $85/share, especially as the shares are up over 535% since then. But Bezos got in, after adjusting for stock splits, at EIGHT CENTS PER SHARE!
Talk about leverage. That translates to a 112,000 percent increase from investment to IPO, and then if he held onto the shares for another 535% on top of that.
3. Invest in People. At the time of Bezos' investment, there were a large number of very well-funded and far more successful search engines already on the market. Remember this was 1998 not 1994. Yahoo. Alta Vista. Lycos. Excite. Looksmart. Webcrawler. Infoseek. Inktomi and GoTo to name just a few.
But Bezos was attracted to Page and Brin as people, as technologists, as leaders. And obviously their customer-centric focus really tracked the way that Bezos looks at the world.
4. Take a Shot. For every Jeff Bezos who invested in Google, there are stories of literally dozens of investors that were presented with the opportunity and did not.
This of course does not mean that the probability of any startup having Google-like success is anything but very low, but it does mean that it is far greater than the ZERO percent likelihood of success of those who don't even try.
5. Get Lucky. Yes, luck is a key, and sometimes the key, variable in entrepreneurship and business. As opposed to fighting or getting philosophical re this reality, a far better question to ask is, "How can I improve my likelihood of, for lack of a better turn of phrase, getting lucky?"
Looking for Opportunities Now?
Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.
To learn more about opportunities we are following now, please click here.
Unbeknownst to most of us, last week was Digital Detox Week.
Digital Detox Week, conceived by Adbusters.org, had the goal of getting people to decrease their reliance on electronics and technology for a week.
The goal was to get people to slow down, to take a walk outside, and to get reconnected with their friends and families.
I found the concept really interesting.
I didn't fully detox, but I did spend a little less time in front of the computer.
And I replaced it with a little more time on the telephone (my office line which I guess is less "digital" than my mobile phone).
And I used the phone to connect with my people. I spoke with clients, partners, friends and others.
And I mostly listened. Since I learned a while back that I don't learn much from listening to my own voice. But when I ask good questions and just listen, I gain great knowledge.
I think everyone can use a detox week or a detox day. I'm not saying to commit the whole week or day to being offline, but just take some time to really think about what you want to achieve in life, and who you want to be around you when you do.
I got yelled at the other morning.
Let me explain what happened.
On Thursday morning, I dropped my son off at school early for orchestra practice.
Now, every time I drop him off, while he's getting out of the car, I shout something at him.
Like - "hey, tell that girl you like her" (while pointing at the girl) or tell that boy you like his shirt.
Well, right before my son left the car that morning he yelled at me. "Dad - stop shouting things at me when I get out of the car. It's embarrassing...."
So, I didn't do it. (and note that I never do it loud enough so that the others will hear).
But let me tell you why I do it.
To begin, for some reason, it cracks me up to do it. I guess that's not really nice, but I find it funny....
But more importantly, I was a bit shy as a kid. Not terribly shy, but I wouldn't have been the first person to go up to someone I didn't really know and say hi, especially not to a girl.
So, I want my son to avoid this shyness. Since it's not a good thing. To be really successful in life, you have to be able to network to meet others, and not be afraid to approach others.
And to be successful in life, you must go outside of your comfort zone. You must try things that might end in failure. You must do things that you know are right, even if they make you feel a bit uneasy.
Almost always, the fear dissipates right away. The fear of asking a girl or boy on a date. The fear of asking an investor for a meeting or money. The fear of calling a company who could become a potential joint venture partner. The fear of starting a new venture, and/or quitting your job to do so.
All of these things could have incredible results, but could also result in rejection or failure.
Without risk there often is no reward.
So I think all of us need to get out of our comfort zone more and take risks.
And be glad that you're not my son and get daily training on how to take risks :)
PS My daughter's only 7, so I take it easy on her...
PPS I will be releasing my Leadership Course this week. Most entrepreneurs don't lead the right way. And as a result they don't achieve the success that other entrepreneurs do.
The vast majority of the course will keep you within your comfort zone; you'll just learn the unique techniques that work wonders.
I believe this course will launch the successful entrepreneurial careers of many of you. So stay tuned.
One of the interesting benefits of my job helping entrepreneurs is that lots of old friends get in touch with me.
That may sound strange to you, but what I mean is that people that I knew from "past" lives, like high school, college, old jobs, etc. constantly contact me.
Lots of them hear about what I do from mutual friends, and the next thing I know, I'm getting emails, phone calls, LinkedIn requests, Facebook messages and so on.
The contact me because they want to become successful entrepreneurs.
In fact, according to The Kauffman Institute, 500,000 new companies are conceived each month in the US alone.
It turns out, people that I have known in past lives, are overly represented in this group : )
But that's a good thing. It's great to reconnect, and I love helping entrepreneurs succeed.
The first questions most of these entrepreneurs asks me is often about developing their business plan.
Which is a good thing. Since the word has finally gotten around that developing your business plan is the first and most important thing that an entrepreneur must do.
But, as I learned, while developing their business plans is often the first thing they START, it often goes unfinished.
And from conversation after conversation, I've found this is because most people simply don't know what to include in their business plan.
As a result, it's really hard to put pen to paper.
It's like telling an artist to paint a picture when they haven't the foggiest idea what to paint.
Or worse yet, when they have multiple ideas in their head and try to get them all in the one painting.
And that is the key issue that plagues entrepreneurs when developing their plans -- trying to include too much information...trying to cram every conceivable aspect of their business, and every idea into their plan.
Rather, your business plan does NOT have to answer every question.
In fact, there are 2 questions that trump the rest. These questions are as follows:
1. Why is there a need for your business?
Mainly, you need to explain why customers need what you will be offering them. At the end of the day, it's your customers that will dictate your success.
2. Why will you succeed?
We all know that business ideas are a dime a dozen. What is it about your idea, about you as an entrepreneur, about your marketing plans, etc., that will enable you to succeed while other ventures fail.
At the end of the day, your business plan MUST answer these two questions clearly.
Sure, there are lots of other key points you need to make, but these two trump the rest.
One of the reasons I put together Growthink's Ultimate Business Plan Template was to guide entrepreneurs through creating their business plans quickly and easily.
One of the keys to its success is that it guides you through only the questions that matter, that you MUST answer in your plan.
And it avoids all the superfluous information that doesn't really matter (and which dramatically slows down the creation of your plan).
To download your copy of Growthink's Ultimate Business Plan Template, and finish your business plan in hours, and not months (or never), click here.